Kapitalizm Seen From a Wider Angle

Conceived as a review of six years of Russian reform, Rose Brady's new book could easily have gone the way of the ruble, dramatically devalued by the economic collapse.

But Kapitalizm retains value as a chronicle of Russian economic life between 1991 and 1997 thanks to the broad-ranging and sensitively executed interviews it contains. Brady, who was Moscow bureau chief for Business Week from 1989 to 1993, moves seamlessly from the corridors of power to the mean streets of Moscow and Magnitogorsk. She remains true to her stated aim of letting the Russian people tell their own stories about the capitalist experiment of the 1990s that followed the collapse of the many experiments inflicted on Russians by the Soviet regime.

The result is a highly readable and accessible basic history of the mercurial economic policies of President Boris Yeltsin's government. Shock therapy, privatization and the transition toward a market economy are covered from both ground level and the overarching ideological and political perspective.

With First Deputy Prime Minister Anatoly Chubais' privatization program, Brady gives us a fascinating look at the way in which a pair of Western financial advisors - Boris Jordan and Stephen Jennings of Credit Suisse First Boston - first helped plan the voucher scheme, before spreading the word to foreign investors that voucher privatization was a potential gold mine. They made their own fortunes in the process.

The pair woke up to the opportunity on offer on Dec. 13, 1992, when the privatization auction for a 44 percent stake in the Bolshevik Biscuit Factory valued the company at a mere $656,400 - set next to the $80 million that a similar Polish factory had gone for when Jordan and Jennings were working out of Warsaw. "We said, 'Jesus Christ, there's an incredible opportunity here,'" Jordan later told Brady.

Within months, the dynamic duo were buying up vouchers to buy into Russian companies on behalf of clients. In the process, they transformed the very process of privatization,setting up a depository system that later grew into Russia's main share depository. This was building capitalism from scratch. Jordan recalled seeing the girls at the voucher vault using condoms to wrap the vouchers because there were no rubber bands.

It is this kind of ground level reporting and insight at which Brady excels. The only time her instincts in this area let her down is in the slices-of-life montage she attempts in the tone-setting, opening chapter. Starting with a "conga line of babushki" and the multitude of new small traders and then cutting to a handful of all too obvious vignettes - a hard-up pensioner selling pens and children's toys she finds in garbage bins, a new Russian thug and a middle-aged factory worker - Brady offers us CNN journalism dressed up as history.

Once the cutesy intro is out of the way, she offers her readers something far more real and engaging. Cutting to the chase, Brady starts with the food shortages and hoarding of fall 1991. While this is also clich?d, it is energetically and feelingly presented and works well as a base from which to launch into the dramatic October 1991 presentation by Yeltsin of Prime Minister Yegor Gaidar's economic program, and the even more dramatic unfolding of that program.

This big picture is competently painted, but the book really shines at those moments when it hones in on the individuals trying to cope with the storm Gaidar released. Here the book suddenly becomes a compelling read.

Andrei and Vera are a couple, "in their twenties, and in love," brought together by the collapse of the Soviet Union and the reforms that follow. Leaving behind their former lives - Andrei's factory job outside of Moscow and Vera's Irkutsk Komsomol role as a procuress for party bigwigs - the pair throw themselves into the new life that has opened before them. Their driving ambition: to own their own kiosk. It is such ambitions that make the many characters like Andrei and Vera in this book so engaging, even if (or because) we never find out how it all ends up.

People and their ambitions also form the book's strongest narrative thread - the story of the Vladimir Tractor Factory, the main employer in the town of Vladimir, the two men who fight over it and the plant's slow decline.

At the start of the 1990s, the factory was under the classically Soviet stewardship of Anatoly Grishin, the charismatic and paternalistic general director who had worked at the factory for 40 years, running it for the last 18.

He is puzzled by the very idea of privatization. "How could he let outsiders take a stake in the factory?" Unable to block the process, Grishin manages, initially, to control it, maintaining his post and his control over the factory after fighting off his rival and former underling, Iosif Bakaleynik.

Bakaleynik, 42, who won a scholarship to Harvard Business School in 1989 after several years under Grishin at the tractor plant, mounted a Western-style corporate raid on the Vladimir Tractor Factory in March 1993 with the stated aim of turning the factory around through Western methods.

The overwhelming majority of shareholders - most of them factory employees - put their faith in Grishin. When his methods failed, they turned to Bakaleynik in mid-1994. By late 1997, with the economy booming, the factory was finally showing early signs of a turnaround, but only after years of layoffs and machinery sitting idle.

We are left wondering how well the factory has coped in the 18 months since then, and to reflect on the difficulties presented by the massive task of turning labor intensive factories built to answer to the Soviet plan into market-oriented engines for capitalist growth.

Nevertheless, the ideological sympathy that Brady feels for kapitalizm - and for the course charted by Yegor Gaidar, Anatoly Chubais and others is obvious and often trying. Although she always strives for a fair portrayal, the triumphalism of Chubais, Vladimir Potanin and others at the time of the 1996 election win and the 1997 boom jars with our knowledge of the catastrophe that followed in 1998. Brady also claims no evidence has emerged to support allegations that the Svyazinvest auction was rigged, concluding that the highest bidder won. But she entirely ignores the book-fee scandals surrounding the royalties paid to both Chubais and to Privatization Minister Alfred Kokh by a publishing house connected to Potanin.

The postscript on the 1998 crash is more an exercise in denial than anything else, skating around questions of cause and culpability and offering a plaintive "We will live and see," at the end.

Her helplessness in dealing with the events of 1998 emphasizes Brady's biggest flaw, her inability to be anything more than a chronicler of events. Her forte is in providing excellent in-depth coverage of those events, and she does it well enough that "Kapitalizm" deserves to be read and re-read for that alone.

"Kapitalizm" by Rose Brady. 289 pp. Illustrated. Yale University Press. $30.